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Aaron’s Inc closing office-furniture unit

Thursday 1 July 2010

Aaron\'s Inc. will shut down its Aaron\'s Office Furniture division, including a store in Charlotte, and take a $9.5 million hit to its pre-tax earnings.

The Atlanta-based furniture, electronics and appliance rentals retailer said it closed all but four of its Aaron\'s Office Furniture stores during the second quarter and now plans to have them all shut down by Sept. 30.

Those final four locations include an operation at 4744 South Blvd. The others are in Atlanta, Dallas/Fort Worth and Hialeah, Fla.

In 2009, the unit generated $16.5 million in revenue with a pre-tax loss of $7.8 million. For the first quarter of 2010, revenue was $3.9 million, and the pre-tax loss was $1.4 million. Second-quarter revenue is expected to be lower, with comparable losses, the company says.

Aaron\'s will take $9.5 million in charges related to closure of the office-furniture unit. That includes the write-down and cost to dispose of office furniture, estimated future lease liabilities for closed stores, the write-off of leaseholds, severance pay, and other associated costs of closing the stores and winding down the division.

\"When we sold our legacy residential rent-to-rent business in 2008, we decided to keep the 13 Aaron\'s Office Furniture stores,\" Robert Loudermilk Jr., president and chief executive of Aaron\'s, says in a statement. \"At the time, we believed there were still opportunities in the leasing and selling of office furniture. However, the office furniture business is highly cyclical, and with the economic conditions of the last several years, the stores have experienced declining revenue and have not been profitable. With no growth or profitability in sight, rather than spending more effort attempting to build this business and incur additional losses, we concluded we should exit the office furniture market and concentrate our future efforts on our sales and lease ownership stores.\"

Atlanta-based Aaron’s also has trimmed its earnings guidance for the second quarter to a range of 29 cents to 33 cents per share from the previous guidance of 37 cents to 41 cents per share, and for the year to $1.36 to $1.48 per share from the previous guidance of $1.48 to $1.60 per share.

\"Our Aaron\'s Sales & Lease Ownership business continues to grow and gain customers, but we believe many customers are cautious as the current economic conditions are having an effect of them,\" Loudermilk says. \"Traffic in the stores has remained good and we still look forward to having an outstanding year.\"

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